Shale gas lures armada of overseas chemical companies to U.S. shores

The prospect of a long-term supply of abundant and affordable natural gas from shale continues to attract foreign-based chemical manufacturers to American shores. In fact, of the total number of domestic and foreign companies that have announced investments in the U.S., roughly half are from overseas.

Bloomberg has reported that Japanese companies Idemitsu Kosan Co. and Mitsui & Co. have applied to build a chemical plant at a Dow Chemical Co. site in Texas. The two manufacturers intend to build a factory using ethylene from natural gas to make alpha olefins, which are added to polyethylene plastics and resins.

The Japanese companies are part of a growing trend, as more and more foreign chemical companies relocate to the U.S. seeking to benefit from secure supplies of inexpensive natural gas.

Another example: The Washington Post recently reported that, since 2009, the German-based chemical giant BASF “has channeled more than $5.7 billion into new investments in North America, including a formic acid plant under construction in Louisiana.”

America’s chemical industry was the world’s high-cost producer five years ago, but is listed among the world’s lowest-cost producers today. “In 2012, industry gas prices were more than four times lower in the U.S. than in Europe,” said a European Union report released this week that described the competitive effects of the disparity in energy costs.

According to Industry Market Trends, “The U.S. is becoming an increasingly attractive location for foreign businesses to operate, largely due to the boom in shale gas production that is making energy costs lower.”

The American Chemistry Council just released a report that documented new chemical industry investments linked to shale gas, including foreign ventures. The report found almost 100 chemical industry investment projects totaling roughly $72 billion in potential new U.S. investment have been publicly announced through the end of March 2013.

The fact that such large numbers of foreign-owned companies are choosing to source their chemistry in the United States is unprecedented in recent history, and a testament to the value and affordability of America’s shale gas and ethane supplies.

And given America’s decisive competitive advantage in the cost of producing basic petrochemicals, we can expect more companies based outside of the United States to announce investments here.